Africa Analysis recently attended the GDS NG Telecoms Africa Summit 2017, held at the Raidsson Blu Hotel in Lusaka Zambia, over the period 26 to 28th of April 2017. The Summit saw the gathering of commercial, operational, marketing and technical executives from telecommunications operators and service providers across Africa. The event provided a platform to discuss the various challenges that telecoms operators face in their respective local and regional markets.

The three key challenges identified by the delegates were:

The network and infrastructure related issues;

The customer and how to improve service and experience quality; and

The future development and trends that African operators are likely to face.

In addition, the keynote address delivered by Lucy Quist, CEO of Airtel Ghana focussed on the concept of “rethinking” telecommunications in Africa and the ability to create and deliver African solutions for the African telecommunications opportunities and challenges. The presentation highlighted the need to adopt fresh approaches to content, data services, infrastructure and devices as network operators across the region begin to look at evolving revenue streams and customer expectations.

The network and infrastructure challenge

The network and infrastructure related challenges emphasized the growing reliance on offshore data centres, cloud security, and a perceived lack of vendor support.

Other key infrastructure challenges identified included:

4G LTE

Data centres

Cloud

Offshore data centres

Cloud and IoT relevance given the infrastructure challenges

The main points of concern were:

Why are these solutions not manufactured on the African Continent?

Do the equipment and solutions vendors have the African operators’ best interests at heart?

Operators maintain the status quo and new technologies and services such as 4G/5G will be irrelevant if it is constructed on a broken system implying that it will not be sustainable.

Services such as cloud and IoT will require operators to fix current problems and challenges.

Operators also highlighted the fact that operators also faced challenges as to political and regulatory stability noting that in certain instances network roll out projects were derailed by government or competitor intervention.

The customer experience challenge

The central theme of the discussion was the ability of network operators to be able to better understand their customers to deliver a better service. At the heart of this was the ability to leverage technology and services such as cloud and data analytics to get to know the customer better. However, operators will need to first develop a brand and loyalty before being able to implement cloud and big data services.

The future

Discussions concerning the future of the network operators in Africa focussed on:

Partnership and monetization potential of the over the top (OTT) players

Internet of Things (IoT) – the revenue potential and expected growth

Bandwidth demand and its growth

LTE – the upgrade path and the business case

The OTT services across Africa present operators with a threat and an opportunity. Many operators have sought to embrace the OTT players and have zero rated the data services of these players to entice additional customers and demonstrate value add for their customers. Others have attempted to offer OTT like services in the form of their own platforms. However, the real challenge for the operators has been the ability to monetize or grow their revenue from these services.

The IoT market presents another revenue growth opportunity. However, operators will need to ensure that they have the right platforms and ecosystems in place for these services to gain traction.

A key concern has been the massive growth of bandwidth consumption across the region. Operators find themselves caught between a rock and a hard place as they face pressure from consumers and regulators to reduce the cost of data services while costs of bandwidth decline, forcing them to offer more bandwidth at the same rates with a resultant growth in data consumption.
The development of 4G/LTE in Africa will depend on the ability of operators to develop a solid base and business case for their existing 3G networks.

Africa Analysis Assessment

The NG Telecoms Summit brought many challenges being faced by network operators to light. However, it appears that these challenges and opportunities are viewed as being separate from each other. Operators need to view the evolution in the communications services as part and parcel of the growth of services in Africa.

End users will become more sophisticated and demanding in services being consumed and the associated costs. This presents operators an opportunity to push more advanced services into the market and begin to re-align their roles from being the mere pipe or conduit for services to being the enabler of application and content. It is at the application and content point of the services stack that Africa can begin to create unique and tailored services to meet local demand.

In addition, the development of future platform and technologies such as 4G/LTE and 5G will depend on the operators and their ability to develop sound business cases for 3G to use as a foundation for these technologies.

A leading indicator that signals the adoption of mobile VoIP is the adoption by mobile subscribers of social networking/instant messaging OTT services. The precursor to OTT service adoption is the strategic drive by mobile operators to increase smartphone penetration combined with an effective data pricing strategy. Mobile VoIP OTT usage leads to traditional mobile revenue disruption along with disruption of the national interconnect market. Mobile operators can choose to either defend against this trend, or embrace this trend and build products that incorporate mobile VoIP.

Introduction

Analysis of information published in Deloitte’s Global Mobile Consumer Survey 2016 provides insight into the adoption of various OTT services across different markets, and over different time periods. We have extracted information pertaining to the adoption of mobile VoIP, social network (SN) usage and instant messaging (IM) for 13 countries located in Europe (EU), Latin America (LATAM) and Sub-Sahara Africa (SSA).

From this data we created the following two charts that provide useful market observations.

The following country (and region grouping) chart provides some interesting insights into the adoption of mobile VoIP and the adoption of social networking / instant messaging. The chart shows the plot of mobile subscriber adoption of social networking / instant messaging plotted against the adoption of mobile VoIP.

From this chart, the following observations can be made:

In all countries, there is a higher adoption of social networking / instant messaging when compared to mobile VoIP; and

Based on the country groups, we see a different adoption across the regions. Surprisingly, the EU countries show a much lower mobile VoIP adoption.

The difference in developed (EU) vs developing country (LATAM, SSA) adoption of mobile VoIP OTT service can be driven by the following factors:

From a disposable income level perspective, the lower price of VoIP (to circuit switched) may not be as attractive / make much difference in developed markets vs developing markets;

The price differential between mobile VoIP (using mobile data) and circuit switched calls may be much smaller in developed markets vs developing markets therefore there is less economic incentive to use mobile VoIP; and

There are other factors such as (1) the difference in age distribution between developed and developing countries, younger mobile users adopt new services at a faster rate, (2) the difference in prepaid vs postpaid mobile services in developed vs developing countries, postpaid will have less incentive to use mobile VoIP given the bundling of minutes in postpaid plans, that can play a role in the markets.

Chart 2: 2013 to 2016 Adoption trend of mobile VoIP service

The following country chart shows the mobile subscriber adoption of mobile VoIP plotted over the period 2013 to 2016 for four countries.

The following observations can be made:

There was significant growth in mobile VoIP adoption in Brazil and Mexico over a single year. Brazil grew by 343% from 2013 to 2014 while Mexico grew by 294% from 2014 to 2015; and

This large jump was not seen in the two EU countries: Sweden and the UK.

It is quite possible that Sweden and the UK have not reached a critical market tipping point with the social network / instant messaging adoption that, once passed, would drive rapid adoption of mobile VoIP.

Drawing out market observations

While the base is small, the data does suggest the following interesting market observations:

#1: The 2016 adoption of mobile VoIP varies significantly between the EU countries (low) and Latin America countries (high adoption), with Sub-Sahara Africa (SSA) countries found between the two regional groupings.

Therefore, developed country adoption of mobile VoIP cannot readily be used as a proxy for the adoption in developing countries.

#2:Social network / instant messaging adoption is a leading indicator and a proxy for mobile VoIP adoption.

Therefore, the higher the adoption of these services, the higher the adoption of mobile VoIP can be expected.

#3: Over a three year period, the rate of adoption of mobile VoIP in Latin America (Brazil and Mexico) is significantly higher than that seen in Sweden and the UK. Various reasons can exist that drive this adoption. For example, this is possibly driven by the perception of higher prices in developing markets, or that the adoption of social networking/instant messaging has reached a critical market tipping point that accelerates mobile VoIP adoption.

Therefore, based on the data mobile VoIP will see faster adoption in developing countries.

So what does this mean?

The market drive to lower mobile data pricing coupled with the aggressive growth in smartphone adoption will see wider uptake of OTT services. Within the OTT bouquet, the growing adoption of social networking/instant messaging services, as shown, will lead to higher mobile VoIP adoption.

We ascribe this linked adoption to social networking/instant messaging OTT services driving the following behaviour:

Grow greater awareness of mobile VoIP availability among social networking/instant messaging users, thus educating users on the use of mobile VoIP; and

Grow usage of mobile VoIP on the social networking/instant messaging platforms where such a service is offered.

Intuitively mobile operators recognise the competitive threat posed by mobile VoIP to traditional mobile services. Through the analysis presented here, we are now beginning to understand the complexity of the OTT threat to traditional mobile services.

Cost and billing was the greatest driver of customer retention. That was in the past. Since 2014, consumers are attributing more importance to service. These are some of the key findings reported by Nokia in its recently completed 2016 Nokia Acquisition and Retention Study.

Drivers of customer retention

A positive customer experience has a direct impact on consumers’ likelihood to stay with their mobile operator. Sounds simple, right? Not quite:

Cost & Billing has the greatest impact on customer retention, but…

Since 2014, consumers attribute less importance to price and more to service

Customer care has 60% more impact on mobile subscriber loyalty than it did in 2014

Consumers expect a certain level of service and device expertise and after care to be offered by their operator.

In South Africa, customer care ranks higher, while cost & billing ranks lower than the survey averages across the various countries (developed and developing).

Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.